Q: The definition of a Phase II "exempt person" in 31 C.F.R. § 1020.315(b)(6) and (7) includes the phrase "only with respect to transactions conducted through its exemptible accounts." Does this mean that certain transactions of Phase II exempt customers require the filing of a CTR?
A: Yes. The scope of the exemption for non-listed businesses and payroll customers is limited by several criteria. While the final rules reduced those criteria with respect to the number of transactions and the waiting period before a bank could treat those customers as exempt, they did not alter the remaining criteria for Phase II customers, including the provision that a Phase II customer is exempt "to the extent of its domestic operations and only with respect to transactions conducted through its exemptible accounts."19 For transactions conducted by the customer outside of the criteria for Phase II customers, the customers would not meet the definition of "exempt person" and could not be treated as exempt by the bank.
For example, a bank may have a convenience store as an exempt non-listed business customer. This customer might regularly make deposits into its transaction account exceeding $10,000 in currency, none of which would require the bank to file a CTR. However, if the convenience store presents more than $10,000 in currency in exchange for a cashier's check, whether the bank is required to file a CTR will depend on whether the transaction was processed "through [the] exemptible account." Specifically, the bank would not be required to file a CTR if the bank credited the customer's transaction account as a deposit and then debited the account to fund the cashier's check, or otherwise processed the transaction in such a way that it resulted in a line item entry into the customer's transaction account statement. The bank would be required to file a CTR, however, if the currency was deposited into and the cashier's check was drawn upon the bank's general ledger account(s), or otherwise did not result in a line item entry into the customer's transaction account statement.
Banks may generally use the test of whether a transaction results in a line item entry into a Phase II exempt customer's transaction account statement to determine whether a transaction was "conducted through [the] exemptible account." For any reportable transaction not conducted through the exemptible account, the customer would not meet the definition of "exempt person" only with respect to that transaction and a CTR must be filed.
This FAQ was obtained from FinCEN’s issuance FIN-2012-G003 – Guidance on Determining Eligibility for Exemption from Currency Transaction Reporting Requirements, which may be found here: